Last year's federal budget ended up with a $39.6 billion deficit

Treasurer Scott Morrison. Photo: Stefan Postles/Getty Images.

The Turnbull government’s 2015-16 budget posted a $39.6 billion underlying cash deficit, $340 million better than treasurer Scott Morrison predicted during the 2016-17 Budget.

The better bottom line came thanks to government spending being $1.6 billion lower than expected, offset by revenue coming in $1.1 billion weaker than expected in May.

The underlying cash deficit is 2.4% of GDP.

The final figure is still nearly $1.9 billion higher than the first and only full Hockey budget in 2014-15, which came in at $37.9 billion, however, it was an improvement on predictions by Deloitte Access Economics in April that the underlying cash deficit would be around $41.7 billion — $4.3 billion worse than projected in Morrison’s MYEFO (Mid-Year Economic and Fiscal Outlook).

Morrison said in fiscal balance terms, the figure improved by $2.0 billion compared with the May Budget estimate, with expenses being $2.8 billion lower than predicted, although revenue was also $1.3 billion lower, and net capital investment $526 million down on expectations.

General government sector net debt was $296.4 billion (18% of GDP), $10.7 billion higher than estimated after lower interest rates increased the market value of Commonwealth Government Securities on issue.

The 2015-16 Final Budget Outcome papers are here.

The result comes ahead of a major speech to the Lowy Institute in Sydney today, where Morrison said immigration and foreign investment were essential to the economic prosperity of the nation.

“Australia has relied on foreign investment to meet the shortfall of domestic savings against domestic investment needs for over two centuries,” the treasurer says in the speech.

“Unlike many advanced economies, Australia needs to fund a current account deficit (CAD) of around 4% of GDP on average each year. Restricting the foreign capital inflows needed to fund this size would result in a reduction in the living standards of Australians, with less investment, lower growth, fewer jobs and lower wages. Previous Treasury modelling suggested that this reduced capital inflow would lower GDP over the following decade by 2.6%, gross national income by 2% and reduce real wages by 7.2%.

Morrison says immigration is an equally important part of the economy.

“Our success as an immigrant nation has been central to building the successful and prosperous economy we have today,” he said.

“Not only has the volume of our immigration programme been the prime driver of population growth that has supported our economic growth, but the composition of our immigration intake has been equally important.”

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